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Private Chinese Online Retailer Stuns Apparel World With $100 Billion Valuation



A company most investors have never heard of is changing the fashion business by doing everything cheaper and faster. And the process is only getting started.

Bloomberg reported last week that Shein, a Chinese fashion company, achieved a private market valuation of $100 billion. Venture capital firms are racing for a piece of the influencer economy.

Regular investors should consider buying Meta Platforms FB (FB) to take advantage.

Shein is not a name that rolls easily off of the tongues of most investors. The company is the product of Chris Xu, a search engine optimization expert. Xu began in 2008 by selling wedding dresses online under the name ZZKKO. Four years late the company got a name change to She Inside and branched out into general apparel. Today Shein, the latest incarnation, is an online-only global fashion empire with customers in 150 countries and $11 billion in annual sales.

The Nanjing, China-based company is now more valuable than Zara and H&M combined, its biggest brick and mortar fast fashion competitors. And Shein growing much faster.

The business model is based on predicting fast fashion trends in real-time, vertically integrated manufacturing, viral marketing through social media influencers, and a logistics network that bypasses container ships and trucks. Shein is fast-fashion in the digital era.


The company uses algorithms that track browsing activity on TikTok, Instagram, Google, and other digital platforms. This information is turned into limited production, on trend clothing in about three days. Items are then marketed online and by thousands of commission-based social media influencers. Customers get their dresses, blouses and earrings five to seven days later in the mail.

Letting the internet predict fashion trends can be messy.

Swastika necklaces produced in 2020 were a public relations flop. And smartphone cases sold in 2021 that depicted a handcuffed black man outlined in chalk missed the mark, too.

Shein makes up for the misses with big hits.

Tapping into the burgeoning influencer community to market its goods has been pure genius. And the company borrowed from TikTok’s experience by spending lavishly on digital ads to reach and remain top of mind with fickle 20-something customers.

General Atlantic, Tiger Global, and Sequoia are among the big name venture capital firms that lined up for a piece of Shein, according to the report at Bloomberg. The $100 billion valuation puts the Nanjing firm as the third most valuable private company in the world, behind only ByteDance, the parent company of TikTok, and SpaceX, Elon Musk’s rocket company.

The venture capital firms understand that Shein has hacked retail with data science and social media. It’s a powerful competitive advantage that will be difficult to replicate.

Meta Platforms is a big beneficiary of the rise of Shein. Let me explain.

These days it is popular for investors and analysts to dismiss Meta as a social media failed experiment. In fairness, a deluge of scandals at Facebook have helped this narrative gain traction. However, at its core Meta is a digital platform of gated communities. Its properties Facebook, WhatsApps and Instagram are critical addresses on the global social media scene.

Shein is ten times more popular on Instagram than TikTok, according to a June 2021 report in the South China Morning Post. When influencers post pictures of their latest Shein haul of new items “the gram” is the location of choice. Meta earns fees by selling ads around that content, as well as larger Shein brand campaigns.

Then there is Shops, a fledgling Meta program to help influencers and Mom and Pop businesses build digital storefronts inside Instagram and the other Meta platforms.

Retailing is evolving. Digital is what comes next. It’s cheaper and faster, and does not depend on ocean-faring vessels or malls shuttered by covid-19. Digital is direct to customer.

At $210 per share, Meta is in the process of building a bottom after falling in September 2021 from $382.50. The stock trades at only 14.5x forward earnings despite its premiere digital properties.

Longer-term investors can think about buying shares into the current weakness.


Teacher, Police And Firefighter Pensions Are Being Secretly Looted By Wall Street



America’s severely underfunded public pensions are allocating ever-greater assets to the highest cost, highest risk, most secretive investments ever devised by Wall Street, such private equity, hedge funds, real estate, and commodities—all in a desperate search for higher net returns that, not surprisingly (given the outlandish fees and risks), fail to materialize. Transparency—public scrutiny and accountability—has been abandoned, as pensions agree to Wall Street secrecy schemes that eviscerate public records laws.

Our nation’s state and federal securities laws are premised upon full disclosure of all material risks and fees to investors: “Read the prospectus before you invest,” is the oft-cited warning by securities regulators. Nevertheless, teachers, police, firefighters and other government workers today are not allowed to see how their retirement savings are managed or, more likely, mismanaged by Wall Street.

For nearly a decade, the United States Securities and Exchange Commision has warned investors that malfeasance and bogus fees are commonplace in so-called “alternative” investments and, more recently, Chairman Gary Gensler has called for greater transparency to increase competition and lower fees.

Gensler has asked the agency’s staff to consider recommendations on ways to bring greater transparency to fee arrangements in private markets. “More competition and transparency could potentially bring greater efficiencies to this important part of the capital markets,” he said. “This could help lower the cost of capital for businesses raising money. This could raise the returns for the pensions and endowments behind the limited partner investors. This ultimately could help workers preparing for retirement and families paying for their college educations.”

Gensler has stated he would like to see a reduction in the fees these investments charge and has also commented on industry abuses such as ”side letters” which permit private funds to secretly give preferences to certain investors—preferences which harm public pensions.


But that’s not good enough to protect public pension stakeholders.

No one—including the pensions themselves—seems to care that the government workers whose retirement security is at risk are being kept in the dark.

The SEC needs to do more—actually alert public pensioners as to those abuses the Commission knows full well are rampant, at a minumum. Advise them, Chairman Gensler, to demand to see and read prospectuses and other offering documents related to their hard-earned savings.

Does the SEC think it’s kosher for Wall Street to conspire with public pension officials to withhold this information from investors—any investors?

Since my 2013 forensic investigation of the Rhode Island state pension exposing gross mismanagement by then General Treasurer Gina Raimondo which I accurately predicted would cost workers dearly; my 2014 North Carolina state pension investigation exposing that $30 billion in assets had been moved into secretive, offshore accounts and, most recently, my investigation of the State Teachers Retirement System of Ohio, I have provided my expert findings to the SEC staff for their review. Each and every public pension forensic investigation I have undertaken has extensively discussed Wall Street secrecy schemes that enable looting. In my book, How To Steal A Lot Money—Legally, I quote disclosures from SEC filings that detail industry abuses.

Join me, Chairman Gensler, in giving government workers a clue, a glimpse, a peek, at the alternative investment abusive industry practices that are carefully guarded by Wall Street and being hidden from them.

Teachers, police and firefighters deserve a fighting chance to protect their retirement savings.

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It Is Time To Buy Bonds



US 10-year note prices are likely to rise through August. The monthly histogram below shows that July and August have been the two strongest months for the note price.

Monthly Return- US 10-Year Notes

Blue: Average Percentage Change

Red: Probability of a rise on that day

Green: Expected Return (Product of the first 2)

These numbers are static in the sense that they change little over the years. This is only one cycle, the one-year cycle, whereas there are many cycles operative at any one time. In order to get a reading on such other rhythms, a scan is run to identify other profitable price cycles. The graph below reveals the most valuable cycles that are operative at any one time.

10-Year Note Monthly Cycle


These cycles reinforce the seasonal tendency for notes to rise. Prices have risen in 60% to 65% of the time in these summer months. With the dynamic cycle also in ascent, the probabilities rise to about 65% to over 70%. There are similar and supportive developments in the Japanese and German fixed income markets.

The cycle projection must be confirmed by market activity. The daily graph reveals that price broke through a downtrend line.

10-Year Notes Broke Through Resistance

Here is a helpful sentiment indicator that supports the bullish view. The cover page of this week’s Barron’s points to much higher rates. Applying contrary opinion, this suggests lower rates and higher note and bond prices. The first objective is 123.0.

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Will There Be War Over Taiwan – The Next Spy Thriller



I usually go through a rhythm of reading one or two serious books, followed by a few works of fiction and with summer on the way I wanted to highlight a few of both. In that regard I have just finished Laurence Durrell’s ‘White Eagles in Serbia’, an old-fashioned espionage thriller where the hero Colonel Methuen is dropped behind enemy lines in post war Serbia (he speaks excellent Serbo-Croat) and becomes embroiled in a violent plot to overthrow Tito.

The book is a warm-up to reading Durrell’s ‘The Alexandria Quartet’, a work that nearly won him the Nobel Prize. Durrell was part of an interesting Anglo-Irish family, who largely considered themselves Indian – his brother Gerald, the naturalist and writer, touches on this in ‘My Family and Other Animals’.


Though I am not an expert on these matters, I found ‘White Eagles’ a more realistic account of espionage than much of what we see in the media today (Mick Herron’s ‘Slow Horses’ is good), and overall it is a tale of derring-do that is more in keeping with the work of the founding fathers of the genre – Eric Ambler, John Buchan, Erskine Childers and Ted Allebury for example.

It also made opportune reading given what seems to be an epidemic of espionage – with reports of the Chinese hacking group APT40 using graduates to infiltrate Western corporates and notably the admission by the head of Switzerland’s intelligence that Russian espionage is rife in that country (notably in Geneva – for which readers should consult Somerset Maugham’s ‘Ashenden’ as background material).

These and other trends – such as the outbreak of a heavy cyber battle last week (against Lithuania and Norway for instance) and the increasingly public ‘clandestine’ war between Israel and Iran (they have just sacked their spy chief) point to a world that is ever more contested and complex.


Secret World

One of the new trends in the space is cyber espionage – both in the sense of stealing state and industrial/corporate secrets, influencing actors (such as the manipulation of the 2016 US Presidential election) and outright acts of hostility such as the hacking of public databases and utilities (i.e. healthcare systems). Here, if readers are looking for some serious literature I can recommend two excellent books – Nicole Perlroth’s ‘This is how they tell me the world ends’ and ‘Secret World’ by Christopher Andrew.

I am personally more intrigued by the difference between a spy and a strategist. A spy’s work could well be described as the pursuit of information about someone who is acting with a specific intent, as well as a sense of their reaction function. There are plenty of examples – from Christine Joncourt (‘La Putain de la Republique’) to Richard Sorge (see Owen Matthews’ ‘An Impeccable Spy’).

In contrast a strategist may try to plot trends and the opportunities, spillovers and damage they may cause. The US National Intelligence department is good in this regard, becoming the first major intelligence agency to publish detailed warnings on the side effects of climate damage.

Spies and strategists might work together, but history is full of examples (LC Moyzisch’s ‘Operation Cicero’) where intelligence fails to make it through the strategic process or is simply ignored for political reasons (might the early warnings on the invasion of Ukraine be an example).

Asia next?

In the spirit of the Durrells and Flemings of the world, what issues might be of interest in terms of digging into unknown knowns and unknown unknowns. Here are a few ideas, most of which are Asia focused (we might see an uptick in Asia focused thrillers).

On the diplomatic front, an interesting recent development was the visit of Indonesian president Joko Widodo to Ukraine, and then Moscow. It was a rare visit to Ukraine by an Asian leader and potentially marks the emergence or at least aspiration of Indonesia (population 273 million) as an emerging world diplomatic player. What has intrigued me so far is that there has been little coordination by the populous emerging (largely Muslim) nations (Nigeria, Indonesia, Pakistan) in the face of high energy and food prices, and that potentially Widodo could play a unifying role here.

Then, still in Asia, but on a more deadly footing, if the Western commentariat is to be believed, China is preparing an assault on Taiwan, and looking to learn from Russia’s military errors in this regard. Other countries are reacting, and I suspect that there will be much intrigue around Taiwan’s ability to acquire sufficiently powerful ballistic missiles that could strike the coastal cities of China, and relatedly how long might it take Japan to produce nuclear missiles (my sources say they could very ambitiously do it in five months!).

So, whilst the espionage literature of the 20th century has tended to be focused on Geneva, Berlin and London in the 21st century we may find ourselves reading about ‘behind the lines’ exploits in Jakarta and Tanegashima.

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